On February 19, 2015, FERC directed the New York Independent System Operator, Inc. (“NYISO”) to propose new tariff provisions and a pro forma agreement for its reliability-must-run (“RMR”) service.  FERC stated that the RMR provisions are necessary because of the uncertainty and potential for reliability issues created by the lack of such RMR provisions within NYISO.

In the absence of RMR tariff provisions in NYISO, FERC stated that several similarly situated generators have executed varying, inconsistent RMR agreements with NYISO.  FERC then stated that some of these RMR agreements were filed with the New York Public Service Commission, while others were filed with FERC.  Due to this inconsistent treatment with the RMR agreements, FERC expressed concern that NYISO’s tariff may be unjust and unreasonable due to its lack of provisions governing the rates, terms and conditions for RMR service.  FERC explained that without such provisions, there is no assurance that generators will not be unduly discriminated against or have the opportunity to collect contemporary rates without an extended proceeding.  Furthermore, FERC explained that the lack of RMR tariff provisions could lead to the unreliable and inefficient operation of the electric grid and NYISO’s markets.  Therefore, FERC, acting pursuant to section 206 of the Federal Power Act, directed NYISO to submit a compliance filing within 120 days after the issuance of its order that provides “tariff provisions governing the retention of and compensation to generating units required for reliability.”

In requiring NYISO to establish RMR tariff provisions, FERC provided guidelines as to what elements NYISO’s compliance filings should contain.  Those elements include:

  • The schedule governing when a generator must notify NYISO that it intends to deactivate;
  • A timeline for when NYISO must complete its reliability analysis and notify the generator whether it is needed for reliability purposes;
  • The process for conducting the reliability analysis;
  • Provisions requiring that all RMR filings include the methodologies and findings in the reliability analyses, the potential reliability criteria violations, and the processes NYISO used to evaluate alternatives for addressing the reliability need;
  • Provisions that address RMR compensation, including a pro forma RMR agreement, and the circumstances required for accelerated cost recovery to generator upgrades;
  • A methodology that specifies cost allocation; and
  • Provisions to eliminate or minimize toggling between RMR and market-based rate compensation.

A copy of the order is available here.